Ohio has emerged as a key player in the Midwest’s economic development, particularly in the realms of technology and infrastructure. A standout feature of the state’s growth is the rise of data centers, which have become central to the modern digital economy. These facilities, which house essential servers and systems for digital services, play a critical role in sectors like cloud computing, artificial intelligence, and cryptocurrency mining. In preparation for and response to the increasing demand for data processing and storage, Ohio has tailored its legal and economic incentives to attract investment in these high-tech industries.
Legal Framework and Economic Incentives for Data Centers
Ohio’s development incentive and tax structure framework is designed to encourage the development of data centers by offering incentives such as a partial or full sales tax and use tax exemption on the purchase of eligible data center equipment. To qualify for exemptions, projects must meet minimum investment and payroll thresholds specified in R.C. 122.175. The exemption applies to computer data center equipment purchased by the applicant or any other taxpayer that operates a computer data center business at the project site and is used or will be used at the eligible computer data center. Computer data center equipment is tangible personal property under Ohio law and may include, for example, tangible personal property used to conduct a computer data center business, equipment cooling systems, and equipment related to power generation, transformation, transmission, distribution, and management as building and construction materials sold to construction contractors for incorporation into a computer data center.
To qualify for this exemption, data centers must generally meet specific investment thresholds, including a minimum investment of $100 million and an annual payroll of at least $1.5 million starting the third year of the development agreement. These measures are intended to stimulate economic growth, particularly in the technology and energy sectors. According to a recent PWC analysis,
“The rapid global expansion of data centers presents significant tax challenges for stakeholders, including hyperscalers, operators, developers, energy and network providers, OEMs and infrastructure investors (the data center ecosystem players). These challenges impact project feasibility, returns and overall competitiveness in an increasingly crowded market.”
Ohio’s incentives for data centers helps data center projects achieve feasibility.
Impact on Ohio’s Economy
The state’s tax incentives have attracted major global tech companies like Amazon, Google, and Meta. These companies have committed billions of dollars in capital expenditures, driving long-term investments in Ohio. While property tax abatements, personal property tax exemptions and incentives help offset initial costs, the presence of these data centers generate local and state revenue through income taxes and infrastructure development. Furthermore, the construction of these facilities creates high-paying jobs and boosts the local economy. Companies like Amazon Web Services also contribute to workforce development programs, schools, and training centers, benefiting the broader community. Potential downside risks to Ohioans may come in the form of increased power demand and higher rates for electricity.
Notable Data Center Projects in Ohio
Several notable data center projects in Ohio showcase the state’s commitment to becoming a key tech hub:
- Vantage: Received a 50% sales tax exemption through 2033 for a $185 million project.
- Amazon: Invested $102 million in a 590-acre data center campus in Jeffersonville, Ohio.
- QTS: Invested around $1.5 billion and developed over 1 million square feet of data centers.
- Intel: Announced up to $20 billion in investments to build two chip fabrication plants on a 1,000-acre site in New Albany.
- Edged Energy: Received approval for a $250 million investment in a 210,000-square-foot data center in New Albany.
An industry map of data centers throughout the state of Ohio can be found here.
Ohio’s Competitive Advantages in Data Center Development
Ohio is positioning itself as the tech epicenter of the Midwest, drawing significant tech investments due to various site location factors. These include targeted workforce characteristics, abundant land availability, reliable power infrastructure, and a robust fiber network. Ohio offers a state-of-the-art 765 kVA power system, along with flexible power provider options, making it an ideal location for energy-demanding data centers. Additionally, Ohio’s central location minimizes latency, which improves the speed of content delivery across the U.S., making it an optimal choice for cloud services and data storage.
Conclusion
KJK’s Economic Development & Incentives practice group works closely with KJK’s Start-Ups & Capitalization practice group to support our data center clients. We provide insights into data center tax incentives and offer guidance on business plans for data center projects in Ohio. For more information, please contact Rich Morehouse (RAM@kjk.com), Charlie Bolton (CHB@kjk.com) or Jace Libman-Phelps (JDL@kjk.com).